B.C. Court of Appeal says partners not employees of law firm

An equity partner is not employee of a law firm and cannot claim the protection of human rights legislation from age discrimination, the British Columbia Court of Appeal has ruled.

Writing in Fasken Martineau Dumoulin LLP v. British Columbia Human Rights Tribunal today, Justice Risa Levine ruled that a partnership is a collective of its partners and thus not a separate legal entity. Therefore Faskens equity partner John McCormick could not be considered an employee of the law firm.

“Of more direct relevance, arising from the same principle, a partner cannot be an employee of the partnership of which he or she is a member, because he or she cannot employ him or herself. . . .” Levine wrote in her decision with Chief Justice Finch and Justice Newbury concurring.

As such, McCormick could not claim the protection of human rights legislation from age discrimination and could be forced by the firm to retire at the age of 65.

Levine continued: “That same body of law makes it a legal impossibility for a partner to be ‘employed’ by the partnership of which he is a member. In my opinion, neither a broad, liberal and purposive interpretation of the [Human Rights Code] nor the analysis of the factual criteria of ‘utilization,’ ‘control,’ ‘financial burden,’ or ‘remedial purpose’ can change that legal conclusion.”

The B.C. Supreme Court ruled last year that McCormick could be considered an employee of the firm as an equity partner, allowing him to go before the B.C. Human Rights Tribunal for alleged age discrimination by Faskens. The firm’s partnership agreement mandates that equity partners must retire at the financial year end of the year in which he turns 65.  

McCormick, a partner at Fasken at the time, was asked to retire when he turned 65 on March 28, 2010. But, because B.C. no longer has a mandatory retirement age of 65, and he wasn’t ready to retire, he took the firm to the human rights tribunal for age discrimination.

The tribunal accepted McCormick’s argument that being an employee extended beyond the common law definition.

When Fasken appealed to the B.C. Supreme Court, Justice Catherine Bruce found McCormick was allowed to bring the complaint because McCormick’s partnership with the firm didn’t fall into the category of a business partnership.

McCormick had argued that the common law characterization of a legal relationship does not apply for human rights purposes, and does not restrict the analysis of the relationship within the jurisdiction of the code.

Faskens had argued that the legal principle of a partnership was not a separate entity but the sum of its partners and therefore beyond the tribunal’s jurisidiction.

Today, Levin agreed, ruling the lower court’s interpretation and conclusion of the Partnership Act and portions of the partnership agreement were an “over-reading” and “legally unsupportable.”

“In my opinion, the chambers judge’s rationale for treating the firm as an entity separate from Mr. McCormick is legally unsupportable,” wrote Levine. “There can be no doubt that in Canadian law, a partnership is not a separate entity from its partners, and a partner cannot be an employee of, or employed by, a partnership of which he is a member.”

Levine continued: “The question is whether this well-established principle of law is over-ridden by a broad, liberal and purposive interpretation of the Code.

According to Levine’s decision, it is not.

“There is no distinction between ‘commercial reality’ and the legal nature of a partnership. The interpretation of the Code, like all statutes, is a legal exercise, where well-established fundamental principles of law apply. If the result of that exercise is that there are gaps in the legislation, it is the task of the legislature to remedy them,” wrote Levine.

Ultimately, the appeal court allowed Faskens’ appeal, set aside the order appealed from, set aside the decision of the Tribunal in 2010, and dismissed McCormick’s complaint on the ground that it was not within the jurisdiction of the Tribunal.

Update: 7:45 p.m.

The decision has been much anticipated by law firms across the country, many of which have partnership agreements containing mandatory retirement clauses. They will likely be breathing a sigh of relief over the ruling.

In response to the decision, William Westeringh, the firm's managing partner in Vancouver, said in a statement:  “We are satisfied with the decision, which reinforces our understanding of the law in British Columbia surrounding the terms of partnership agreements. This is an isolated issue that is unprecedented at Fasken Martineau.”

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